83% of Americans With Medical Debt Say It is Burdensome Enough to Prevent Them From Making Major Purchases, According to the Cambridge Consumer Credit Index

ISLANDIA, N.Y., Feb. 6 /PRNewswire/ -- Over eight out of ten Americans who have outstanding medical debt say that these debts are either a major or minor burden, preventing them making purchases of large ticket items, such as houses, cars or major appliances, according to the Cambridge Consumer Credit Index.  Of those with medical debt, 17% say this debt is not large enough to prevent their purchases.  Of those surveyed, 16% owe on debt associated with a medical or dental procedure, including the purchase of prescription drugs, while 84% have no outstanding medical debt.  21% of the respondents have neither medical or dental coverage, 49% have dental insurance and 76% have some form of medical insurance, including Medicare.

"The results of the Cambridge Consumer Credit Index wildcard question show that medical debt is a large and growing problem in America.  With 21% of the population we surveyed having no health insurance coverage at all, people run into severe financial problems if they have major unreimbursed medical or dental procedures.  Right now 16% of the population is burdened with medical debt and the vast majority of those find this debt enough of a burden to prevent them from buying things they want and need. As the number of uninsured Americans grows from the current 43.6 million, the burden of medical debt is going to become even more crushing for many Americans.  Even employees with health insurance are being asked to shoulder more and more of the burden of healthcare costs through rising deductibles and co-payments, so we should expect them to feel squeezed by rising medical debt as well in coming years," says Jordan Goodman, spokesperson/financial analyst for the Cambridge Consumer Credit Index.

These findings are the result of monthly nationwide telephone poll of 1000+ adults conducted by ICR/International Communications Research in the past week, sponsored by the Debt Relief Clearinghouse.

The overall Cambridge Consumer Credit Index dropped by six points from January to 53, its second consecutive 6-point drop and the lowest level since October 2002.  The Index rose in one of the three composite questions.  The "Reality Gap," which is the difference between the amount of debt consumers say they will pay off in the next month versus the amount of debt they actually paid off a month later, increased to 7 percentage points from 4 points in January.  A month ago, 79% of Americans planned to pay off debt, while a month later 72% actually did so.

The Cambridge Consumer Credit Index is a forward looking economic indicator gauging consumer spending and debt.  It is released on the fifth business day of every month to coincide with the Federal Reserve Board's G19 release of consumer credit outstanding data.

In conjunction with the Index, the Cambridge Credit Counseling Corp. is releasing its monthly survey of people who have called in for credit counseling services over the past month.  Cambridge representatives ask callers for the primary reason that they found it necessary to get help with their debts now.  According to Chris Viale, Chief Operating Officer, Cambridge Credit Counseling Corporation, "Our monthly client survey indicates that large and unmanageable medical expenses are forcing more and more consumers to seek credit counseling assistance.  Any unexpected change in spending, such as a medical emergency, can cause consumers to quickly fall into dangerous levels of personal debt if not planned for properly.  It is impossible to predict what will happen in the future, but it is important to plan for uncertainty by creating an emergency fund as part of your overall budget and fully researching the medical costs you or your family members may incur."

Of the 906 people who answered, this was the order of their responses:

1. I am frustrated with high bank rates and fees (31.1%)

2. My income has been reduced from a lower salary, less overtime or layoff (25.1%) 

3. I want to improve my ability to achieve future financial goals like buying a house or saving for retirement (14.1%)

4. I got into too much debt by overspending (10.2%)

5. My lack of financial education caused me to take on too much debt (6.6%)

6. Other (6.1%)

7. Large medical expenses forced me to take on huge debts (4.9%)

8. My recent divorce or widowhood forced me to take on large debts (2%)

For more information on the survey see http://www.cambridgeconsumerindex.com/content=client-survey

The Cambridge Consumer Credit Index number is a composite of these three questions:

1. In the past month, have you taken on more debt or paid off debt?

The Index reads 56 on this question, a drop of eight points from January.

In February, 28% of Americans say they have taken on more debt, with 21% taking on a little and 8% taking on a lot more debt.  Conversely, 72% of Americans have paid off debt, with 52% paying off a little and 19% paying off a lot.

2. In the next month, do you anticipate taking on more debt or paying off debt?

The Index reads 30 on this question, a drop of twelve points from January.

In February, 15% plan to take on more debt, with 3% planning to take on a lot and 12% planning to take on a little debt.  Conversely, 85% plan to pay off debt, with 63% paying off a little and 22% paying off a lot.  In January 21% planned to take on debt and 79% planned to pay off debt.

3. In the next six months, do you expect to take on debt because you are thinking of making a major purchase such as a car, education, appliance, medical procedure, furniture or carpeting?

The Index reads 74 on this question, a rise of two points from January.

In February, 37% of Americans plan to take on more debt to make such purchases, with 11% taking on a lot of debt and 26% taking on a little more debt.  In contrast, 63% of Americans plan to pay off debt in the next six months, with 47% expecting to pay off a little and 16% expecting to pay off a lot.  In January 36% of Americans planned to take on more debt, while 64% planned to pay off debt.

"The results of the Cambridge Consumer Credit Index survey indicate that consumers are tightening their purse strings and using far less credit for the second consecutive month after the holidays.  Credit usage is now at the lowest level since October 2002, when the economy was much weaker.  Some of this belt tightening is clearly seasonal.  The lack of job growth seems to be making consumers reluctant to go into further debt.  However, the future intentions question indicates an overall optimism at higher levels not witnessed in the last few years," says Jordan Goodman, spokesperson for the Index.

The Index survey is conducted by ICR (International Communications Research) of Media , Pennsylvania over five days in the week before the Index is released.  Over 1000 households are polled based on random-digit dialing, with all demographic and regional groups in America fairly represented. The Index has a margin of error of plus or minus three percentage points.

For more information about the Cambridge Consumer Credit Index, contact media relations representative Paramjit Mahli at mailto:pmahli@cambridgeconsumerindex.com or 631-786-6450, or economist Allen Grommet, who provides an economic analysis of Index results, at agrommet@cambridgeconsumerindex.com or 800-804-0575, or the Index website at http://www.cambridgeconsumerindex.com/.  Consumers wishing to find out more about Debt Relief Clearinghouse placement services should call 1-888-4DEBTHELP or visit http://www.debtreliefonline.com/.

SOURCE  Cambridge Consumer Credit Index
CO:  Cambridge Consumer Credit Index; International Communications Research
ST:  New York
SU:  SVY
Web site:  http://www.debtreliefonline.com
http://www.prnewswire.com
02/06/2004 08:20 EST